From the New York Post:
Federal agents have launched parallel criminal and civil probes of JPMorgan Chase and its trading activity in the precious metals market, The Post has learned.
The probes are centering on whether or not JPMorgan, a top derivatives holder in precious metals, acted improperly to depress the price of silver, sources said.
The Commodities Futures Trade Commission is looking into civil charges, and the Department of Justice's Antitrust Division is handling the criminal probe, according to sources, who did not wish to be identified due to the sensitive nature of the information.
The probes are far-ranging, with federal officials looking into JPMorgan's precious metals trades on the London Bullion Market Association's (LBMA) exchange, which is a physical delivery market, and the New York Mercantile Exchange (Nymex) for future paper derivative trades.
JPMorgan increased its silver derivative holdings by $6.76 billion, or about 220 million ounces, during the last three months of 2009, according to the Office of Comptroller of the Currency.
Regulators are pulling trading tickets on JPMorgan's precious metals moves on all the exchanges as part of the probe, sources tell The Post.
JPMorgan has not been charged with any wrongdoing.
The DOJ and CFTC each declined to comment, as did JPMorgan.
The investigations stem from a story in The Post, which reported on a whistleblower questioning JPMorgan's involvement in suppressing the price of silver by "shorting" the precious metal around the release of news announcements that should have sent the price upwards....MORE
*I had a comment on a September 2008 MarketBeat post, "Silver Probe Cheered By Investors" [do tell -ed]
Silver investors are embracing the news that regulators decided to take a fresh look at the market. Yesterday, the Commodity Futures Trading Commission confirmed to the Wall Street Journal that the division of enforcement is conducting an investigation into the silver markets.
“We take the threat of manipulation in the futures and options markets very seriously and employ a number of measures to prevent, identify and prosecute it,” said Stephen Obie, acting director of the agency’s division of enforcement.
For many years, silver bulls have said that prices are being artificially depressed downward, citing the CFTC’s data showing that a handful of U.S. banks have controlled a large portion of short positions in the market. Regulators and analysts have not been persuaded.
In 2004, the agency published an open letter to silver investors by Dr. Michael Gorham, the former director of market oversight who now teaches at the Illinois Institute of Technology, Dr. Gorham this week recalled what triggered him to write the open letter. “Over one weekend, I received over 200 emails from individuals, everyday people who have been convinced to invest in silver” by silver commentators.
“I was angry because these guys were losing money, and then when it didn’t work out, they blamed it on conspiracy,” he said. In the letter, Dr. Gorham responded to the argument raised by investors by analyzing market movements, silver fundamentals and large traders’ positions. “I really felt this very large group of people was misled by” these commentators, Dr. Gorham said....MORE